Banking and insurance chapters TOPIC: Role of information and Communication technology

1. Electronic Banking
E-banking is a product designed for the purposes of online banking that enables you
to have easy and safe access to your bank account.
E-banking is a safe, fast, easy and efficient electronic service that enables you access
to bank account and to carry out online banking services, 24 hours a day, and 7
days a week.
With this service you save your time by carrying out banking transactions at any place
and at any time, from your home or office, all you need is internet access.
E-banking enables the following:
• Accurate statement of all means available in your bank account
• Statement of current account, credits, overdrafts and your deposits
• Execution of national and international transfers in various currencies
• Execution of all types of utility bill payments (electricity, water supply, telephone
bills, etc..)
• Carrying out customs payments
• Electronic confirmation for all transactions executed by E-banking
• Management of your credit cards

2. Electronic Banking
Current trends of E - banking
The e-banks, which may call as easy bank offers the following services to its
customers:
• Credit Cards/Debit Cards
• ATM
• E-Cheques
• EFT (Electronic Funds Transfer)
• DeMAT Accounts
• Mobile Banking
• Telephone Banking
• Internet Banking
• EDI (Electronic Data Interchange)

3. Role of information and Communication technology
Information Technology enables
• sophisticated product development
• better market infrastructure
• implementation of reliable techniques for control of risks
• helps the financial intermediaries to reach geographically distant and diversified
markets. Internet has significantly influenced delivery channels of the banks.
• Internet has emerged as an important medium for delivery of banking products
and services.
• The customers can view the accounts, get account statements, transfer funds and
purchase drafts by just punching on few keys.
• IT does so by maximizing banks of pro-active measures such as strengthening and
standardising banks infrastructure in respect of security
• communication and networking, achieving inter branch connectivity, moving
towards Real Time gross settlement (RTGS) environment the forecasting of
liquidity by building real time databases,
• use of Magnetic Ink Character Recognition and Imaging technology for cheque
clearing to name a few. Indian banks are going for the retail banking in a big way.

4. Role of information and Communication technology
Technology has similarly influenced individuals’ communication patterns
• Easy way for product and service surveying
• Text messaging services
• Social networking platforms
• Free internet calls
• Video conferencing
• Use of digitalized networks to communicate
Core banking vis –a – vis traditional banking
Basis of Difference Traditional Banking Internet Banking
Presence Banks exist physically for serving the
customers,
Internet banks do not have physical presence
as services are provided online.
Time It consumes a lot of time as customers have
to visit banks to carry out bank transactions
like — checking bank balances,
transferring money from one account to
another.
It does not consume time as customers do not
have to visit banks to check bank balances or
to transfer money from one account to
another. Customers can access their account
readily from anywhere with a computer and
internet access.
Accessibility People have to visit banks only during the
working hours.
Internet banking is available at any time and
it provides 24 hours access.

5. Core banking vis –a – vis traditional banking
Basis of Difference Traditional Banking Banking
Security Traditional banking does not encounter e-security
threats.
Online banking is the tempting target for
hackers. Security is one of the problems faced
by customers in accessing accounts through
internet.
Finance Control Customers who often travel abroad cannot pay close
attention and control of their finances.
Customers who often travel abroad can have
greater control over their finances.
Expensive Customers have to spend money for visiting banks. Customers do not have to spend money for
visiting banks. They can avoid bank charges
that may be charged for certain teller
transactions or when they pay bills
electronically — directly from their account to
the merchant. It helps to save money on postal
charges.
Cost The cost incurred by traditional banks includes a lot
of operating and fixed costs.
Such costs are eliminated as the banks do not
have physical presence.
Customer Service ln traditional banks, the employees and clerical staff
of the bank can attend only few customers at a time.
In online banking, the customers do not have to
stand in queues to carry out certain bank
transactions.
Contact Customers can have face to face contact in
traditional banking.
Customers can have only electronic contacts.

6. Banking technology
1. Block chain Technology
Block chain technology is set to fundamentally transform banking and financial services.
It decentralizes financial management from a central authority to a widespread network of
computers. Financial transactions are broken down into encrypted packets, or “blocks,”
which are then added to the “chain” of computer code and encrypted for enhanced cyber
security it’s been compared to “email for money” by block chain start up.
2. Upgraded ATMs
ATMs transformed the bank tech system when they were first introduced in 1967. The next
revolution in ATMs is likely to involve contactless payments. Much like Apple Pay or Google
Wallet, soon you’ll be able to conduct contactless ATM transactions using a smart phone.
Some ATM innovations are already available overseas. For example, biometric authentication is
already used in India, and iris recognition is in place at Qatar National Bank ATMs. These
technologies can help overall bank security by protecting against ATM hacks.
3. Proliferation of Non-Banks
Banks are hoping that technology will allow them to deliver a faster, more transparent experience
to consumers. A large portion of their resources, however, is necessarily dedicated to
security, compliance and other industry-specific requirements, which has allowed non-banks
or financial service providers that are not regulated by the banking industry
4. Apple Store-Style Experience
Apple store, directing customers to interact with tech kiosks for some transactions and reserving
person-to-person interaction for answering questions or addressing needs unique to the
individual consumer.

7. Banking technology
5. Mobile and Digital Banking
The mobile and digital transformation in the banking system has only just begun and
growth is already explosive. Banks are investing heavily in digital banking
technology, in which customers use mobile, web or digital platforms to use
banking services. Artificial intelligence solutions, such as chat bots, often assist
customers in simple tasks such as making payments.
6. Partnerships
Although banks can pour lots of money into technology, the fastest way to deliver
financial innovation in the future is likely going to involve strategic partnerships.
Fast-growing companies that already have new-wave fintech or social media
platforms in place could make excellent partners for traditional banks seeking
to enhance customer experience. Card-linked marketing company Cardlytics,
which engages in data analytics, is partnering with several financial institutions
7. Wearables
Wearables — such as smart watches are poised to become the future of the retail
banking experience, according to Samsung Insights. Another type of wearable
might be smart glasses for bank tellers, according to a report from Deloitte, which
could process customer banking information for the employee as the employee is
simultaneously doing other customer service tasks.

8. Alternative Delivery channels
The term Alternate Delivery Channel (ADC) generally used for Alternate Service Delivery
Channel (ASDC) or Alternate Banking Channel (ABC) in the Banks for its services to the
customers. Channel means the system of intermediaries between the producers,
suppliers, consumers, etc., for the movement of a goods or service.
ATM: (Debit / Credit card)
The ATM has evolved to support a wide variety of services, including deposits and account
details. An innovative touch screen interface with customized shortcuts to reflect
individual user requirements.
Telebanking:
This marked a shift by many organizations towards centralized customer service centres,
often with an automatic reply service (IVR) incorporating voice recognition systems.
However, despite these efforts away from personal interaction, the majority of call
centres activities still involve human representatives, particularly when dealing with
transactions.
Online banking:
Initially used to present an institute’s marketing platform, the websites are now enjoying a
new lease of life as a door to the world of 24-hour online transactions. Some countries
even prefer the instant access to online account information and transactions to that
offered by traditional banking

9. Alternative Delivery channels
Mobile banking:
This channel is relatively new but is already showing steady growth. Used in its early
stages as a push/pull tool for information text messages, cell phone banking now
supports personal account access and is forecasted to become the new mobile
payment method or “digital wallet” of the future.
Social media:
Recent years have seen social media creeping up alongside cell phone banking. Banks
feel the need to counteract the impersonality of our digital age by offering
customers greater contact on a perceived one-to-one level. Although most social
media platforms still rely heavily on marketing content, the trend is firmly set
towards development of more interactive services.

10. Cheque Truncation System (CTS) or Image-based Clearing System (ICS)
• In India, is a project of the Reserve Bank of India (RBI), commencing in
2010, for faster clearing of cheques. CTS is based on a cheque
truncation or online image-based cheque clearing system where cheque
images and magnetic ink character recognition (MICR) data are captured
at the collecting bank branch and transmitted electronically.
• Cheque truncation means stopping the flow of the physical cheques
issued by a drawer to the drawee branch. The physical instrument is
truncated at some point en route to the drawee branch and an electronic
image of the cheque is sent to the drawee branch along with the relevant
information like the MICR fields, date of presentation, presenting banks
etc. This would eliminate the need to move the physical instruments
across branches, except in exceptional circumstances, resulting in an
effective reduction in the time required for payment of cheques, the
associated cost of transit and delays in processing, etc., thus speeding up
the process of collection or realization of cheques.

11. E –lounges
The E-Lounge facility will provide banks customers with various products such as cash
withdrawals and deposits, cheque deposits, pass-book printing, internet banking
and online trading among others without any manual intervention under one roof.
Unified Payments Interface (UPI)
It is an instant payment system developed by the National Payments Corporation of
India (NPCI), an RBI regulated entity. UPI is built over the IMPS infrastructure and
allows you to instantly transfer money between any two parties' bank accounts.
BHIM is a mobile payment mode that enables you to make instant money transfers
directly between two bank accounts. Additionally, you can also make payments
merchants who accept BHIM UPI as a payment mode for transactions.
Bhaath Interface for Money (BHIM) is a mobile app developed by National Payments
Corporation of India (NPCI), based on the Unified Payment Interface (UPI). It was
launched by Prime Minister Narendra Modi, on 30 December 2016 and is intended
to facilitate e-payments directly through banks as part of the 2016 Indian
banknote demonetisation and drive towards cashless transactions
The app supports all Indian banks which use that platform, which is built over
the Immediate Payment Service infrastructure and allows the user to instantly
transfer money between bank accounts of any two parties. It can be used on all
mobile devices.

12. Electronic Fund Transfer
• RTGS stands for Real Time Gross Settlement, which can be defined as the continuous
settlement of funds individually on an order by order basis . Considering that the funds
settlement takes place in the books of the Reserve Bank of India, the payments are final and
irrevocable.
Real-time gross settlement systems are specialist funds transfer systems where the transfer
of money or securities takes place from one bank to another on a "real time" and on a
"gross" basis. RTGS systems are typically used for high-value transactions that require and
receive immediate clearing.
The basic difference between them are settlement timings. RTGS is based on the gross
settlement where the transaction is settled on an instruction by instruction basis. NEFT is an
electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis
which settles transactions in batches.
• National Electronic Funds Transfer (NEFT) is an Indian system of electronic transfer of money
from one bank to another. It was introduced by Reserve Bank of India. It is an electronic fund
transfer system that is based on Deferred Net Settlement (DNS) which settles transaction in
batches.
• NACH
National Payments Corporation of India (NPCI) has implemented “National Automated Clearing
House (NACH)” for Banks, Financial Institutions, Corporates and Government a web based
solution to facilitate interbank, high volume, electronic transactions which are repetitive and
periodic in nature.
NACH is a web based platform to facilitate interbank, high volume, electronic transactions for
Banks, Financial Institutions, Corporate and Government. It basic functions like an electronic
clearing service available especially for banks. NACH was launched by the National Payment
Corporation of India (NPCI).

13. Global trends in banking technology
OPEN BANKING GOES MAINSTREAM
This year, attitudes toward Open Banking will start to separate those who want to
differentiate themselves by being good trading partners from those still hunkering
down behind trade barriers, seeking to harvest diminishing profits from old business
models.
PUT IT IN THE CLOUD
There is already plenty of evidence that the cloud can be as secure as any private data
center. In 2018, the conversation around cloud will shift from “if” to “how and when.”
FEWER HEART TRANSPLANTS, MORE BYPASSES
Traditional mainframe core banking applications are not well suited to the digital
economy. Rather than ripping out and replacing decades-old technology, look for banks
to “freeze and wrap”—using existing core systems as books of record, while moving
customer engagement and analytics to the cloud.
BECOME TRULY DIGITAL OR GET OUT
Customers today expect to be able to sign up for new banking services online. In 2018,
a failure to provide true digital origination will start to move from a disappointment to
an existential threat.
MAN OR MACHINE
A big threat for banks this year will be synthetic identity fraud. Banks will need to get
better at sorting real customers from fake ones, without undermining the benefits of
a great digital customer experience.

14. Global trends in banking technology
DIGITAL FIRST WILL MEAN FEWER BANK BRANCHES
Digital banking will continue to shrink the number of global bank branches. The
challenge for banks is to quickly get to their right mix of branches and digital
offerings to be when and where customers want to bank.
FINTECHS ARE FRIENDS
Fintech lit an innovation flame under incumbent banks and accelerated their
evolution. 2018 will likely see more fintech acquisitions as large players buy rather
than build.
ROBOTS GET TO KNOW YOU
Artificial intelligence may start to provide contextual, holistic advice that is truly in
the customers’ best interest, requiring a level of radical transparency unfamiliar to
most banks. If banks fail to provide it, someone else will pick up the mantle.
BITCOIN COULD BE THE NEXT TULIP CRAZE
Like the roller-coasting value of a Dutch tulip bulb in the 15th century, Bitcoin is
unlikely to defy economic gravity over the medium term. What will continue to
matter is the evolution of the underlying distributed ledger technology.

15. IT security in banks
IT security in banks
One-way Security
• Secure Socket Layer (SSL)
• Safeguarding Online Purchases
• Feel secure
• Encrypts data between the client and the server by making a direct connection
• Client sends an encrypted key to the server
• Server decrypts and returns to the client
Two-Way Security
• Public Key Infrastructure (PKI)
• Insures privacy for both online company and online bank customer
• Enables users to securely exchange data and money through public network
Online banking
• Digital signatures – ensures identity
• Firewall – shield between the internal systems and the Internet
• Virtual Private Network – allows authorized outside users to access company data

16. Disaster Management for Banks and Financial Institutions
Definition for Disaster Management
the actions taken by an organization in response to unexpected events that are
adversely affecting people or resources and threatening the continued operation
of the organization.
It involves disaster avoidance, disaster recovery and business continuity planning.
They are explained by the researcher as below:
• Disaster Avoidance: Disaster avoidance is a series of measures designed to
prevent, detect, or contain potentially calamitous incidents. It is a component of
business continuity planning, which stresses an organization need to have its
critical business services available at all times.
• Disaster Recovery: Disaster Recovery can be defined as the organization's ability to
get back into business quickly after an event that disrupts the flow of information.
This is done through a set of pre-planned, coordinated, and totally familiar
procedures with an established set of priorities . The disaster recovery is the
concept of “failsafe”. That is, the bank’s ability to survive the disaster it has so
valiantly tried to avoid. The disaster recovery plan is extremely necessary to the
survival of a bank.

17. Disaster Management for Banks and Financial Institutions
• Disaster Recovery Planning (DRP) is a very complex and labor-intensive
process; it therefore requires redirection of valuable technical staff and
information processing resources as well as appropriate funding. In order
to minimize the impact such an undertaking would have on scarce
resources, the project for the development and implementation of
disaster recovery and business resumption plans should be part of the
organization’s normal planning activities.
• Business Continuity Planning: BCP is the process whereby financial
institutions ensure the maintenance or recovery of operations, including
services to customers, when confronted with adverse events such as
natural disasters, technological failures, human error, or terrorism.

18. Marketing of banking services
The marketing of bank services is the activity of presenting, advertising and selling of
bank's products in the best possible way in order to satisfy consumers'
requirement profitable. Marketing of banks services is one of the services
rendered by financial industry (bank)
Types of business banking services
• Business loans.
• Checking accounts.
• Savings accounts.
• Debit and credit cards.
• Merchant services (credit card processing, reconciliation and reporting, check
collection)
• Cash management (payroll services, deposit services, etc.)
Essential banking functions and services.
• Accepting deposits. One of the primary roles of the banks is accepting deposits.
• Saving deposits. Banks also help their customers to save through the saving
accounts.
• Fixed deposits.
• Remittance facilities.
• Loans and advances.

19. Marketing of banking services
Importance of banking services
• Provides services
• Aimed to satisfy customer’s needs and wants
• Needs and wants may be non financial in nature
• Competitive element, efficiency and effectiveness
• Organizational objectives are still the driving force
• Commercial objective to make profit
• Social Objectives
• Deliver total satisfaction to the customer
Market research and product development
The most common types of research in the financial services and banking sector:
• customer satisfaction and loyalty studies
• consumer behaviour research (e.g. Usage and Attitude),
• customer service quality analysis (e.g. mystery shopping),
• target group research
• corporate image research
• B2B research.
Product development
• Purpose.
• Simplicity.
• Speed.
• Security.
• Repetition

20. Factors influencing bank offer promotion among consumers
1.The communication means
Advertising sales the place (PLV) - Information signs - User guide - Ambience - Brand - Signalling
panels - Advertisement - Mailing - Plaques - The exterior architecture Communication media
2. Interpersonal Communication
Personal contact - Commercial staff - Customer - The sales force - Public relations - Promoting
"verbally"
Promotion of banking products and services are taken into account factors
1. Apathy consumers - customers, most consider necessary and important services/banking
products, but a small part of them are interesting indeed and acquisition; the majority view
services/banking products as a "necessary evil" because of insufficient motivation to take
possession of them.
2. The high degree of risk - perceived by consumers; because there is no possibility of testing
intangibility of services/products before buying, so not being able to assess their benefits;
3. Low credibility of information sources - consumer opinion is formed due to the construction
and development of its relations with the financial institution and much less after
advertising;
4. Minority consumers in the market - is another factor influencing the effectiveness of
promotion because there is a very low proportion of individuals in the state "ready to buy" at
any time. Thus, knowing the precise target segment appears and also the possibility of losing
potential consumers;
5. The competition of similar financial services - due to fierce competition in the market has
increased the number of suppliers of products and banking services and similarities between
them. Products and services on the banking market can be copied easily, so that competitive
advantage is very low in time.

21. Third party products in banking
Third party products in banking
• Insurance products
• Gold coins
• Mobile Recharge
• Mutual funds
• Govern bonds
• DeMAT Account
• Collection of taxes and utility bills
• Advisory services
One Stop Shop Financial Solution in Banks
A one-stop shop is a company that offers a multitude of products or services to its
customers. One-stop shop can refer to a specific location, meaning that all the
business a client has can be carried out at that location. For example, a bank may
be able to offer you not only personal banking services and loans, but
also investment advice, investment vehicles and insurance policies. Compared to
visiting a separate institution for each area of need, the one-stop shop saves the
consumer a lot of time and effort.

22. Financial advisory services
• Financial advisory services
A financial adviser (or advisor) is a professional who provides financial guidance to clients based
on their needs and goals. Typically, they provide clients with financial products, services,
planning or advice related to investing, retirement, insurance, mortgages, college savings,
estate planning, taxes and more.
Functions
• Financial advisers provide clients with specialist advice on how to manage their money.
The role involves researching the marketplace and recommending the most appropriate
products and services available, ensuring that clients are aware of products that best meet
their needs and then securing a sale.
• Services offered
Financial advisors assess the financial needs of individuals and help them with investments (such
as stocks and bonds), tax laws, and insurance decisions. They help clients plan for short-term
and long-term goals, such as education expenses and retirement. They recommend
investments to match the clients' goals.
• The work of a financial advisor in an insurance company
Advise clients on financial plans utilizing knowledge of tax and investment strategies,
securities, insurance, pension plans, and real estate. Duties include assessing clients' assets,
liabilities, cash flow, insurance coverage, tax status, and financial objectives to
establish investment strategies.